UPDATE 1-ANALYSIS-Ex-PMs regain grip on Bangladesh politics

(Adds U.S. envoy's comments)

By Anis Ahmed

DHAKA, June 14 (Reuters) - Bangladesh's self-styled
"interim government", which took over with army backing 18
months ago vowing to rid the country of corruption and restore
democracy, seems to be backing away from its promises, analysts
say.

The release of former prime minister Sheikh Hasina on
Wednesday on parole and a possible similar step for her rival
Begum Khaleda Zia point to a major shift of policy, they said.

"We demand the government to explain the context of
Hasina's parole, clarifying why she has been released," said
Ferdous Ahmed Qureshi, chief of the Progressive Democratic
Party.

"It appears that a section of the government is conspiring
to take the country back to the pre-January 2007 period," he
told a news conference.

Both Hasina and Khaleda had been detained since last year
for alleged corruption.

The government's gestures have been welcomed by Hasina's
Awami League party and Khaleda's Bangladesh Nationalist Party
(BNP), the biggest political groups in the country.

The 15 years in which they alternated power were marked by
political unrest, and Bangladesh also ranked high among
countries for corruption, adding to woes from natural disasters
like cyclones and flooding to which the South Asian nation is
prone.

The incumbent interim government headed by former central
bank governor Fakhruddin Ahmed has been strongly backed and
influenced by the country's powerful armed forces.

Army chief General Moeen U. Ahmed has repeatedly said the
military was not willing to take state power -- something it
did more than once in the past -- but its indirect role in
running the government is still evident.

Two of the government's 10 advisers (ministers) are former
army officers, while the head of the Anti-Corruption Commission
is a retired army chief.

In-service or ex-military officers hold many other key
positions, including in the Election Commission, the
telecommunications regulatory commission and others.

Bangladeshis generally saw the troops, already well thought
of for their important rescue and relief work in natural
disasters and their international peacekeeping roles, as doing
the right thing in helping remove the country from the grip of
politicians, whom many viewed as corrupt and incompetent.

POPULARITY PROBLEMS

Fakhruddin's government earned quick popularity after
assuming power in January 2007 over its attempts to fight
corruption and promises to end the country's traditional
politics of feuding and violence.

In addition to the two former prime ministers, around 170
other key political figures, including dozens of former
ministers were jailed. Nearly 50 have already been convicted
and others are being prosecuted.

But the popularity of such moves was blunted as the
government failed to contain rocketing food and commodity
prices.

Though much of the rise was due to external factors and
reflected worldwide trends, many of Bangladesh's people, most
of whom are illiterate, blamed the crisis on the government.

And the country's politicians played up the issue in their
effort to pressure the government to restore their freedom to
operate and ease up on the anti-corruption drive.

With pressure building both at home and abroad, the
government paroled Hasina on Wednesday for eight weeks,
allowing her to travel to the United States for medical
treatment.

Khaleda, also in detention and being prosecuted for
corruption, is also expected to be paroled, officials said.

While Khaleda has refused to seek medical treatment
overseas, she demands her sons, Tareque Rahman and Arafat
Rahman, be sent abroad for better health care -- something the
government tends to accept, officials and analysts said.

CHALLENGES

They said the challenges facing the government include
convincing major political parties, especially Hasina's Awami
League and Khaleda's BNP, to join in the election next
December.

Sending the ex-premiers abroad or at least allowing them to
move freely within the country would likely appease their
parties and bring them to the polls.

Without their participation, analysts say, the election and
related reforms would be mostly ineffective, and the interim
authorities would be open to charges from rights groups and
foreign countries of not restoring democracy.

Foreign attitudes are important to the impoverished and
disaster-prone country of more than 140 million, which still
relies on large amounts of direct and indirect foreign aid.

The U.S. Ambassador, James F. Moriarty, termed Hasina's
release as a "good start" and said the political parties and
government must work together to ensure a fair and credible
election.

But he wanted the anti-corruption drive to proceed.
"Certainly corruption is a huge problem in Bangladesh and the
drive against corruption should be continued," the envoy added.

Hasina and Khaleda -- who alternated as prime minister for
15 years -- are the main contenders in the coming vote and one
of their parties is likely to form the next government.

"Whatever good things or reforms they carry out will not be
meaningful or legitimated without the participation of major
parties," said Tanjib-ul Alam, a senior lawyer and political
analyst.

"That is why they released Hasina and will likely do the
same to Khaleda," he told Reuters.

Officials said the government was reviewing the Emergency
Power Rules (EPR) to allow people held on corruption charges to
be given bail, and that even those convicted could be allowed
to appeal and contest the election.

Mujahidul Islam Selim, general secretary of the Communist
party of Bangladesh, said: "the government appears to be trying
to protect the corrupt and allowing corruption galore again."

(Additional reporting by Serajul Islam Quadir and Masud
Karim)

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